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tv   Lunch Money  Bloomberg  April 28, 2014 12:00pm-1:01pm EDT

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>> live from bloomberg headquarters in new york, this is market makers with erik schatzker -- will come back everybody. we are live at the milken conference. click the last two hours were so good we decided to stay with you for one more. let's have a recap. the first person we sat down with was team schwartzman. concerned --e is
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are concerned about the global economy. do you feel like he is not as concerned as everybody else's. >> steve is playing in the private markets. those investments take a lot longer to mature. whether he feels relaxed or not it is not easy to move illiquid assets if you are a black so -- if you are a blackstone group and one of the things we talked about was russia. impossible not to talk about russia. steve sits on an international advisory panel. that is a position he still holds. i want you to hear steve schwarzman talking about the rifts in russia and how he plans to respond. >> i think in the short term, other than if you are a market operator, which we are not, we buy assets on a longer-term basis as a rule in most of our businesses. it is time to watch. this can have a variety of from going back to
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business as usual or lurching off into some other direction. to make markets to make money. who is on the other side of the market? steve tannenbaum. at where gasu look is straining in the 400, and is -- in the risks, it steve tannenbaum said it is a 10 so it is a great value. it echoes what howard mark said to us last week. if you want to be an outstanding investor you cannot be part of the pack. you have to have strong convictionsto do -- and be willing to do what others .ren't willing to >> people have to look around the stock market so they are
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poking around in credits and finding or at least buying things they would not have touched five years ago. >> they are poking around in private equity. lack stone has been able to raise more money from retail investors than anyone else out there. guys want to be investing in private equity when they can buy apple, google, ibm? if they want the returns that steve schwarzman don't clippers -- schwartzman delivers -- >> will we have seen is all kinds of people drifting away from style. >> that makes me feel like it is 2007 coming back. >> starwood capital, one of the world's foremost real estate investors, from his perspective he says things are beginning to feel like 2006. the question is whether 2006 leads us to another 2008. >> i am going to counter that because we sat down with the cfo
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of morgan stanley. at banksight going on is really strong. stronger than maybe we thought in 2005, 2006. there are not as much levers in this system. >> i will give you another steve schwarzman. >> it's like ping-pong. >> we talked to both of them about valuations in high-tech. if you look at a deal like whatsapp, facebook buying the texting company for $19 billion, should that give you pause? steve schwarzman says it is a wake-up call if not a warning. at the very least they are much easier to justify today than they were back in 1998 and 1999. >> you wanted to be the banker facilitating those deals. youou are steve schwarzman are looking at valuations from a completely different lens. >> perhaps.
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>> eric and i can argue in new york or in california. >> let's move on. our ownt to bring in colleague from the west coast. jon erlichman joins us now. there is so much talk in the media. so many media giants and cable in the news. >> i love to see you guys fighting in person. >> i don't necessarily love the valuation but i am a whatsapp enthusiast. >> here's the thing. speaking of facebook, there are some companies in this neck of the woods that facebook has shown interest in. -- theyode interest showed interest in snapchat and they did not get that one. but they did get oculus, this reality. virtual a lot of people are talking about the tech scene and what
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the bigger media companies are doing. what is getting the most attention is disney acquiring maker studios, which operates in this world where they -- >> later today you and i are sitting down with roy own -- with ryan kavanaugh. why didn't that deal happen? has been described is the deal was already done. if you want to be interested in buying something you have to come to the table earlier in the process. but it does highlight that there is a huge curiosity, whether you are one of the newer studios or one of the more traditional studios, in the world that is digital. that is why this was interesting to talk about. ago people months asked how these companies made even -- companies even made money. >> is it too late for brian cavanagh to come in and buy them? cl
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>> maybe they just didn't getting an invitation to the prom. >> it does signal there are more deals to come. it is a flag out there to others. >> given the transformation that is taking place in media now, are the banker saying we are angeles --ar los when we think of california and deals we immediately think of silicon valley. is los angeles going to become more and more part of that conversation? >> it feels like it. i believe the anchors parachuted in from new york. they're staying at this hotel and others trying to make deals happen. innk about what is going on new york. the broadcast networks have the upfront swear they go in front of the advertising and say this is our grate programming, give us some ad dollars. now that companies like netflix and amazon and aol -- they are doing the same thing.
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it is the new media companies going in front of advertiser saying, this is the great stuff we have, which is better than broadcast tv. have sat down with these youtube stars with millions of followers. ther followers are between ages of 14 and 20 five who aren't watching tv and spending money. >> media has artie one. we have overtaken tv. the dollars would suggest the online video advertising market is a bigger advertising market then the tv broadcast one. what you think? quick strike ilieve media has already won? think it's too early. clark's what do i do? i dvr all of my shows and fast-forward through every commercial.
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when i am watching a video online i have no choice but to watch the advertisement. thank you so much. john and i will be back later on sitting down with ryan kavanaugh. sitting downso be with bob iger. we will share that interview with you tomorrow. >>rk's is the third hour -- it is the third hour. the future of the automobile. it is one of the reasons why we are here at milken. we will be back in a few four minutes -- few short minutes. ♪
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>> market makers is live from los angeles. i'm erik schatzker. >> i am stephanie ruhle. >> with us as russian air, the
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global head of development at is rajd motor company -- nair, the global head of development at the ford motor company. >> increasing percentage under automated conditions, also about connectivity in the vehicle, more propulsion technologies are going to cold. -- going to go. >> what kind of car is ford going to be making five years from now? will it be different from the fusion or focus? >> i think you will see a lot of the technology you see in the car already. we already have cars with adaptive cruise controls, ultrasound sensors, cameras. an increasing use of those sensors will allow adaptive cruise to go all the way to a.
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and automatically parking your -- to a full stop and automatically parking your vehicle. >> how many years away? >> i think it is hard to predict. at 820 20, 2025 time. you'll see integration of technologies that will be a higher percentage of your driving that is done automated before you get to that 95 or 97% automated. theou guys are shaking up industry with an f1 50 that is made entirely out of aluminum. now, and wem expect all cars will be made out of aluminum or a combination of aluminum and carbon fiber? >> you will see a lot of technologies, not just aluminum. eighting will be the big
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picture going forward. if we can reinvest that savings ways for -- - into clark's what is the secret of the fusion's success? -- >> what is the secret of the fusion's success? >> a lot of great technology. technology form the customer. it is all about scale. if we can get the volumes up and smart design, then we can bring that to the mainstream consumer and make it affordable. our-efficient powertrain, ego boost powertrains, it doesn't hurt it is a gorgeous car. you have a shell vgp 500 or the fusion?
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driving, 662for horsepower doesn't hurt. >> the gp 500 is not something people can buy. when those people are looking at ford versus general motors and ford versus chrysler, they recognize ford has something others do not, which is a super high-end sports car. -- four does not have, which is a super high-end sports car. >> those are very special projects. we have 23 launches going on this year. we have a new focus coming out, a new transit coming out. we have a great lineup of small cars. we are pretty busy right now. >> are you concerned that these are sobering new models and so many new products, could you be saturating the market?
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>> i think the best metric that ties the market share is your portfolio. have a very that we good portfolio on the show room. i think it has been a big part of our success. about -- if ford believes they were in need to have a high-end sports car i'm sure you would have won. what is it about that market that isn't appealing enough. >> it is very low volumes. it is tough to make sense of the investment required to do a full on sports car. we are heading in a different direction. we think putting our resources into different vehicles can touch more consumers and is the heart of us as a mainstream manufacturer. >> one of the places you are heading to his europe. what do you have to do to the european buyers?
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>> mustang is such an american brand. >> you hit it, it is an american icon. you don't want to do anything to the mustang other than the legal requirements. what people around the world love about the mustang is it is an american icon. moreis why there are mustangs outside of the u.s. than inside the u.s.. we had a chance to celebrate with all of them last week as we celebrate the 50th birthday of the mustang. >> whenever it happens, changes coming to ford. how might it be different for for them as opposed to working for alan mulally? iswhat alan's real legacy his he has put together all of the skills, the behaviors, the structure, that it is a very
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sustainable process. we have all worked together for so long. we know exactly what the other is thinking. >> thank you so much for joining us. >> he is the global head of development for the ford motor company. better, getting even bob diamond joining us after the break.
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>> for more on the story is
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michael moore of bloomberg news. has issuesamerica with the stress test. >> it is unusual for after the process is over to have something like this come up. you think the fed would have discovered this during the process. it has been going on since they bought merrill lynch in 2009. notes for the structure. citigroup was restricted for qualitative reasons. resubmitachs had to their plans because of qualitative reasons. banks are still coming to terms with what the fed wants. there are some cases like this where it is just a simple error. >> go figure. black eye is this for brian moynihan, who has been trying to increase the dividend? >> it does not look great for in 2011 hecause
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promised the dividend increase and that got rejected. they finally got their dividend increases. they are going to bump it to five cents per share. that is on hold until they resubmit. >> are they still going to go for the five cents dividend increase quarterly? >> the total buyback will be lower than what they asked for originally. we also note that will come from the buyback or dividend. the feds have 30 days to resubmit. they look at the answer on that. our heads going to roll? >> it will be interesting to see. it is a really tough process. heat for taken some
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these processes because this is a major thing. interesteds are because of payouts, the capital payouts. if revenue is not growing you need some income from these stocks. >> he said oppenheimer said it was a relatively minor flaw, investors need some reason to go want to buy stocks. >> it might be a minor error in but --bers may be minor >> big impact. thank you, i appreciate your input on bank of america. we are approaching 26 past the hour so it is time for bloomberg's on the markets. here is a look at the markets. it is a relatively missed day. -- mixed day. we did have some positive x, data -- some positive economic data.
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taking a look at individual stocks, taking a look at newmont where the s&p abandoned its -- they disagreed on the proposed spinoff of some of the company's minus if they were able to merge. still not returning what they need and costs are on the rise. a triple manning best triple whammy -- a triple whammy. earnings came in at the top line .eat estimates what it really depends on was down nine percent quarter on quarter. more market makers is coming up
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next. we'll take you back to l.a. with an interview with bob diamond. we will be back in two minutes.
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>> this is a special edition of market makers with erik schatzker and stephanie ruhle. >> locum back to this very special edition of market makers live from the milken conference in l.a.. , with us as a man you will all recognize. a couple of years ago he was the ceo of barclays and he now runs atlas merchant capital. he is investing in inking in africa. >> he needs no introduction. investing in banking in africa. he needs no introduction. >> when you left barclays you could have done anything.
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you could have gone into private equity. why did you decide merchant capital and why africa? >> good questions. i had no interest in retiring. i think financial services -- deeper is an area with possibility today than even before the crisis. one of the impacts of the crisis is that there are going to be a lot more on china real business models. entrepreneurial business models. if you look at the major input -- major indexes, it is up 30% .ince the crisis financials are still down quite a bit. bigca, as you know, was a and important business at barclays. i have had experience since the 2005 acquisition.
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look. a natural place to >> i know you are comfortable with africa by virtue of your experience. you built a team to help you with that regard. and how you get investors comfortable with africa? when they look at a country like nigeria and they see a toernment that is willing fire the central bank governor, a guy who was cleaning up their banking system, how do they get comfortable? how do you make them comfortable? >> you are right. think he is one of the best central bank governors in the world and was doing very positive things. sub-saharan africa is not one integrated country. it is 46 different countries and each will be different. some are in better shape for investment than others. we do think nigeria is a big and important opportunity. i think what our business model has differentiated in many investors in africa starts with
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our decision to raise urban and equity and list on the london stock exchange. for the companies we are looking to acquire that is a big positive. it is permanent equity, it is not going to come out when the lp wants it to come out. i think the second part of the business model that differentiates us is we do not think of ourselves as just investors. we really think of ourselves as operators. positionsing majority and working very closely with the management teams to actually impact the business models. business models in africa are rallied in many of the banks, not all of them. they are rather simplistic. about getting big returns. >> when you think about nigeria and the rule of law and the history in that country, many people feel that -- feel
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massively uncomfortable making any sort of investment there. >> what we found with the equity is the investors who invested in were predominantly from the u.s., which was surprising. surprising, in a pleasing way, is the vast majority of them -- for the vast majority of them this is their first investment in africa. the fact we have had a number of people who have operated in africa so they have confidence arnold ism -- chairing the operation and was the former ceo of echo bank. of we look at this as an opportunity to impact the operating environment. i think that gave some comfort. i would also say if you look at opportunities to invest, there is corruption in certain areas in africa but not just africa. this is something that has to be
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a part of due diligence and investing in operating in many countries around the world. >> how do you price political risk? the uncertaince rule of law? >> excellent question. if you look at our first acquisition, bank abc, it is in five countries. it is in an exotic region. it would be one of the top 20 gmt's and the world. that's 20% current earnings. it has a management team that has been together for two decades. i think that is priced appropriately. there is no one way to look at that. when you look at the current earnings, the management team, the respect the management team regulators -- >> you said when you left barclays you never thought you
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would leave the financial service industry and their are a lot of entrepreneurial opportunities. does that mean there are not a lot of opportunities left for big banks? >> we talked about this when i did an op-ed in september. am i and in europe -- i think the u.s., in the u.k., and in europe there hasn't been one that has been too big to fail. >> you are also a mentor and a friend to somebody people in the industry. the feeling top talent want to the inside large investment banks right now -- do you feel like top count want to be inside large investment banks right now? >> i think if you look at the facts there are not as many jobs or opportunities anymore.
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you cannot look at the financial services industry today and not recognize the big more complex things. regulation is costing some of the banks to exit businesses like commodity straining. it is a business day. if you are looking for a job in financial services you have to balance both of those. >> how you win as the ceo of a british bank today? you used to run barclays. not only are they exiting the but david walker, the chairman, was forced to defend bonuses in his efforts to compete with wall street. if a bank debt is a bank like withays trying to compete u.s. banks in an impossible position? >> i'm not going to make
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comments on barclays. >> in the current climate, and the climate that you knew well, is it impossible to be a british universal bank and compete with the likes of jp morgan and bank of america and citigroup and morgan stanley? clock's -- >> that is a fair question and i think time will tell because that is a question in lot of people are asking. i think the answer is yes. i think barclays footprint in is anvestment banking area top-tier footprint. management will find a way to continue to benefit. >> they are being forced to back away from that footprint. barclays isn't alone. look at the situation rbs is in. >> i think if you look at the very top investment banks in the world, they all have challenges. the most successful ones are going to be successful for decades and decades and decades.
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we are still working through the challenges of much lower volumes. to see these challenges over the next couple of years. i guarantee you investment banking as an industry will be a robust business for decades. >> says the guy who does not seem to mind running a british bank any longer. >> he seems to be having a good time. >> bob diamond, it is great to see you. we will be back in a couple of minutes with a special edition of "market makers," live in los angeles.
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>> welcome back to market makers. the tribeca innovation awards had the biggest buzz in new york last week. awards toiving businesses disrupting the establishment. one such recipient is the ceo of levi's brand jeans.
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how could a guy running a 150 euro company -- 150 year old become a destructor? here is how. >> when he think about disruptive innovation, everybody goes to technology, they think this century. levi's, think about levi's was the original start up in san francisco. it wasn't in a garage or a dorm, it was actually a taylor creating a solution in the gold mining era, durability of pants. the 501 has taken a life of its own. associated with the gold rush but you have had moviejobs, kurt cobain, stars, athletes -- how do you keep it evil thing this brand? >> i'm not sure -- keep evolving this brand? >> i am not sure it is us.
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looking back in history, levi's is at its best when it finds itself at the edge of a modern frontier. it was the gold rush, then , soldiers when they weren't in uniform did after the world war ii end up with the rebels with or without a cause. and rollsudden rock hits, think of woodstock. i think we had a close to 100% market share there if you were not naked. the modern frontier started to shift to places like album covers with bruce springsteen and the berlin wall. stay on the edge of the modern frontier and you can become relevant. >> the genes have been around since 1890. how do genes reflect cultural changes? >> we will collect 1873, the invention of the 501. of it was designed with purpose, designed for durability.
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it was a work gene, a pair of purposeful pants erie -- pants. something we to be weren't. basically we said the 501 made by us is finished by you pre--- by you. >> you are now selling a $750 pair. and was walking around here surprised to see as much denim and blue jeans. maybe it is casual friday. think of what people are paying for sutent fashion. a couple thousand dollars for a suit. you will wear your jeans more than you wear that suit. why not give yourself the opportunity to have a custom fit pair of jeans? aspiration for that but accessible for everyone. levi's is the most democratic brand on earth. >> how do you figure out who your audience is and where? your times square's store is an epicenter for the 501. in the meatpacking district,
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that is where you know to roll .ut >> we like to think of our consumers as fans. they don't want us to change. they know their fit. andave fans who loved us left us and we are trying to get them back. and we have fans who haven't even heard of levi's yet but in a word of this world of crazy decisions, picking out a pair of jeans shouldn't be one of them. >> you want to make levi's a 150 roll start up. how? >> when you fly into san francisco, everybody thinks technology, silicon valley, you think about those brands that started with an idea. it truly evolved quickly. the rise was the original start up. as the millions flowing and the billions of pairs of jeans you saw, you have to have that mentality. i have had the opportunity to spend a lot of time with a culture in san francisco. they are looking for investment, looking for scale, for awareness
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of their brand. not only do we want you to know , we want you to like us as well. we have everything starts are looking for. what we need? entrepreneurial ship, innovation. we need to take a piece of denim and -- of denim and turn it into a finished product. i think about jeans, i want a great pair of pants that make my but look good. what do i need? when you think about innovation, yes there are materials and different suppliers that can bring you things. i think we have an opportunity and obligation to truly innovate. in our latest product for women, look at the makeup industry and how do you use tones and shades? what do women want? , make myut look great
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legs look a little longer, and give me something that won't be stretched out by the end of the day. we took some cues from there in our heritage about what we knew about them and -- about them. -- about denim. does the jean jacket with jeans look good? he is the ceo of levi's brand. he knows how to rocket. -- how to rock it. we will be back with our special edition from the milken conference in los angeles.
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>> we are live from the milken global conference in sunny los angeles. at the beverage you that at the beverly hilton. beverly hilton. >> everyone we stat down with over the last three years -- sat
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down with over the last three everyone we sat down with is truly a special guest. what has stood out to you? any moments where you said, wow? .or me it was sterling not just because his skin looks so great but very talking about the upcoming election, he stands behind jeb bush but he likes volatility in the market. he is talking about the hotel business in new york getting soft. >> i have to tell everyone before it gets too late, there is more coming from milken on bloomberg television. you can see it right here. of the mayor of large central us -- the mayor of los angeles is with us. ryan kavanaugh of relativity media. in just a minute. so much more coming from milken.
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we'll see you this afternoon. ♪
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bloomberg television is on the markets. let's take a look at where stocks stand today. we do have a little bit of a mixed picture today, not huge changes in the make -- in the major equity averages. s&p, very little change. the dow is just up 3/10 of one percent.
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the nasdaq is lower by 7/10 of one percent. take a look at commodities as well. we have wti above 100 bucks per barrel. we have been seeing it hover at those levels. at the same time we are seeing seeing -- as libya is forced to resume exports. and in terms of what is happening with gold, if you take a look at gold prices, the backdrop for gold is money managers have increased their long in gold last week. it is the best start to a year since 2006 for gold. you are looking at the six month chart where we are still seeing decline. coffee prices are up almost 90% so far this year. sally field joins us with a look at what has been driving up prices. >> you wouldn't know because you
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are a tea drinker. difficult because you are looking at unprecedented crippling drought in brazil. i am talking about three months of nearly no moisture. those are the fancy beans we drink at starbucks versus the instant coffee you might get from a folgers. the drought stunts the growth of branches as well as beans. that can lead to the first global shortage in five years. as crippling effect from brazil. >> how much of world coffee productions does brazil -- >> about half. they are a pretty huge producer. columbia comes in second. columbia's action is actually pretty good and you are seeing inventory is very high for this year. there may be more bad news down the road. a month ago they were praying for rain in brazil. now they might get a flood because el niño might be coming this year.
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cripple theg to beans and branches even more. >> that means prices could go up more. droughtif you have a issue with coffee trees you're going to have an issue the following year. it is not like a rogue a crop that may be able to regenerate. you will have issues with the soil, issues with the trees. many analysts are looking for a 10 million bag shortfall next year. that would mean record high prices for coffee. and issue here is issue -- is an issue year -- and issue a year down the road. >> what else can you do? are there other types of beans you can substitute? >> we have seen some suppliers been and blended so you have a hedge your bets. the good news is as you have a company like starbucks typically buying out by 18 months. they don't need to buy right now. 40% supply of their
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coffee beans in 2015. they also tend to pay up more anyway. they have arty pay two dollars per pound when the -- two dollars per pound because they want the coffee at the right time. we are also seeing companies grow coffee directly. there are steps they can take. when you will -- when you got it by you got a bye. >> will be on the market again in 30 minutes. ♪
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in san from pier three francisco, welcome to bloomberg "west." a race against time as microsoft tries to fix a major security flaw in internet explorer, that hackers are already using in targeted attacks. we are expecting the biggest ipo filing since facebook with alibaba. the commerce e-commerce giant is on an investment spree with the latest deal announced today. your topcheck on headlines. apple and samsung are ready to make their final pitches to the jury. closing arguments will begin today

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